When a business experiences rapid growth, waiting 60 or 90 days for customer payments strains working capital. Invoice factoring and asset-based lending facilities provide immediate cash by advancing 80% to 90% of an approved invoice face value upon issuance.
However, factoring is not simple borrowing. It involves multiple simultaneous financial flows: initial cash advances, reserve holdbacks, interest charges, transaction discount fees, and eventual customer collections.
Four Essential Balances to Reconcile on Every Factoring Schedule
1. The Loan Liability Balance. The total principal advanced by the lender must reconcile line-by-line against the lender’s portal statement.
2. The Reserve Account (Asset). The 10% to 20% retained by the lender pending customer payment represents company cash and must sit on the balance sheet as a restricted asset.
3. Factoring Fees and Interest. Lenders deduct interest and processing fees directly from cash payouts. These must be recorded to interest expense rather than net against customer revenue.
4. Customer Sub-Ledger Cleared Balances. When customers pay the factor’s lockbox, customer sub-ledgers must be credited immediately to avoid chasing clients for balances they have already settled.
Why Daily Reconciliation Is Essential
Leaving factoring reconciliation to month-end guarantees confusion. A high-volume business might see dozen daily disbursements and settlements. Daily posting ensures cash positions and available borrowing limits remain accurate.
Accounts Receivable Governance With Bahulya Fintech
Bahulya Fintech delivers disciplined daily accounts receivable tracking, factoring reconciliation, and customer payment allocations. We keep your credit facilities transparent and your customer ledgers accurate.